April 4, 2014 / 12:21 PM / 4 years ago

DB departures deal blow to flagging SSA franchise

* Key bankers’ departures hit bank at tricky time

* Deutsche Bank plummets in key public sector league tables

* Greece mandate offers glimmer of hope

By Helene Durand

LONDON, April 4 (IFR) - Deutsche Bank’s public sector debt capital markets business was dealt a blow this week after three experienced bankers left their positions, compounding a difficult time for the bank which has lost market share in the sovereign and supranational market.

SSA origination head Bill Northfield, who has been at the bank for over 20 years, is taking a sabbatical, while SSA syndicate co-head Adrien de Naurois and SSA trader Hiren Gudka have left for Bank of America Merrill Lynch.

“It’s a body blow for them to lose experienced professionals with such strong client relationships,” said a senior banker. “SSA is an extremely competitive market and banks will be eager to fill Deutsche’s shoes.”

The moves come as Deutsche has slipped down the public sector league tables to levels not seen in years. Market participants are now speculating that the bank is struggling to maintain market share in what has become an expensive, capital intensive business.

“This is a risk capacity issue, not a problem with their origination effort,” a senior head of public sector debt capital markets said. “Management is very focused on the bottom line and if it doesn’t make sense from a P&L point of view, then you have to pull back.”

Last month, Michele Foresti, co-head of European of European rates and credit trading, left the bank, also for BAML.

Deutsche said in July last year it was planning to reduce its balance sheet by up to 20% in an attempt to meet new leverage rules. And in January, chief executives Anshu Jain and Juergen Fitschen predicted further pain in the flagship fixed income, currencies and commodities (FICC) business.

Piers Brown, an analyst at Macquarie, said at the time that management was committed to FICC, but that market share could not be defended indiscriminately.

“Public sector issuers should be worried, and if this business does not work for Deutsche Bank, how can it work for anyone? They are the flow monsters,” said another senior DCM banker. “The days of global investment banks being everything to everyone are over.”


Deutsche has fallen to number 16 in the euro sovereign league table, according to Thomson Reuters data. Its worst performance in the last seven years was in 2009, when it finished the year at number eight.

It is a similar story in euro supranationals, where the bank is currently placed at number 10. The bank hasn’t finished this low since 2008.

The bank has even taken a hit in its domestic market as one of the Finanzagentur’s auction group. After holding either the number one or two position since 2001, it slipped to six at the end of 2013.

Supranational and sovereign issuers have resisted signing two-way collateral agreements with banks, preferring one-way credit support annexes - contracts that require banks to post collateral to SSA issuers when out of the money on swaps, while not receiving collateral when the situation is reversed.

Being too capital intensive was one of the reasons UBS decided to close down its public sector operation at the end of October 2012. That decision shocked at the time, but many now say the restructuring was ahead of the curve.


However, Deutsche remains number one in the euro agencies league table, up from number six last year. In dollars, it is number two, the same as last year.

Its slide in the dollar sovereign league table has not been as dramatic either, with the bank at number five, down from number one last year. In dollar supras, meanwhile, it is at number two, having held the top spot in 2013.

It is too early to write off the bank from just its first quarter performance. “The SSA business continues to be a key market for Deutsche Bank and we remain committed to serving our clients,” said a spokesperson for the bank.

It is the only European bank, alongside three from the US, that is lined up to manage Greece’s highly-anticipated 2bn five-year bond sale, which is expected later this month.

Bill Northfield’s seat will also not remain empty for long. Nigel Cree, former head of syndicate Americas, will return after a sabbatical of his own to fill the position.

On syndicate, Achim Linsenmaier, who had co-headed with de Naurois since 2012, is likely to become sole head. (Reporting by Helene Durand, Additional reporting by Christopher Whittall, Gareth Gore, editing by Alex Chambers, Julian Baker)

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